Airlines Push Back Against Delhi Airport's Differential Tariff Proposal
The user development fee is levied on passengers to fund airport development and modernisation. It is included in final ticket price, collected by airlines and later passed on to airport operator.
Domestic airlines as well as industry representatives have opposed the proposed tariff hike by the operator of Delhi Airport, calling it "discriminatory" and too costly for both passengers and airlines.
IndiGo, Air India, and Akasa Air, along with associations including the International Air Transport Association and the Federation of Indian Airlines, have voiced concerns over the steep increase in user development fees during a shareholders' meeting on Feb. 17. They argued that the proposed hike places an undue cost burden on both airlines and travellers, according to several people familiar with the matter.
Moreover, they opposed the variable tariff structure, which sets costs based on travel class and flight timing—a first for any airport in India.
The user development fee is levied on passengers to fund airport development and modernisation. It is included in the final ticket price, collected by airlines and later passed on to the airport operator.
Currently, both domestic and international passengers pay a flat Rs 52 as UDF on their base ticket price. GMR Airports-led Delhi International Airport Ltd. has proposed increasing this fee to up to Rs 610 for domestic passengers and Rs 1,620 for international passengers for the next two financial years, besides additional hikes in aeronautical charges and landing fees.
A sharp rise in UDF will increase airfares. "Even if higher margins in the business class segment allow airlines to absorb the UDF increase without significantly raising ticket prices, the hike for economy class passengers is substantial," an airline executive said on condition of anonymity. The steep hike in UDF would further strain airline margins, typically during low-demand periods when they offer discounts to maintain passenger traffic.
IATA has urged the Airports Economic Regulatory Authority to reject this "excessively complex and discriminatory" tariff structure proposal involving aircraft type and flight timing, among other variables. The structure is "onerous" on both passengers and airlines, and it goes against the International Civil Aviation Organisation's principle of non-discrimination in airport charges, said Amitabh Khosla, IATA’s country director for India.
"We encourage AERA to address the differential between the domestic and international landing fees and user charges," he said.
Regulator AERA sets a five-year revenue target for the airport, based on operating costs, depreciation, non-aeronautical revenues, and taxes, along with the associated charges for the airport operator.
The airport operator, in its tariff proposal letter submitted to AERA on Feb. 10, has cited higher capital expenditure and debt servicing amid continued losses as reasons for the proposed increase in tariff.
"We have also asked AERA to moderate the proposed charges increase, including maintaining a realistic view of the investments, costs and returns to the airport operator to ensure that airport users are protected," Khosla said.
The tariff rates for Delhi airport were last revised in 2019. Delhi airport made revenues worth Rs 152.48 crore in fiscal 2024 from UDF.
The last dates for submitting comments and counter-comments are March 3 and March 13, respectively. After taking feedback, the regulator will issue the final order that will determine how costly travelling by air to and from Delhi Airport will become. The new tariff will be implemented from April.
